Councillor Ken Wood, a member of the contracts and partnership scrutiny committee, said unless Service Birmingham is selling services to other agencies the joint venture arrangement is a waste of time.

He spoke as the committee looked at how the council plans to save £20 million a year from the core IT contract following renegotiation last year.

Coun Wood (Cons, Sutton Newhall) said: “We are trying to cut the cost of the contract and while we can reduce service, we could also raise income. But I don’t see any evidence of that. It is supposed to be a joint-venture with a profit share – but if it is a case of the council paying money in and then getting some profit back we are just recycling our own money.”

The new chief executive of Service Birmingham Tony Lubman replied there were some external clients for Service Birmingham applications and services – including schools and a wing of Capita providing services for Sheffield City Council.

He said: “Some of the biggest challenges are around growing the business and growing outside the city.” He urged the council through its links with schools and other authorities – perhaps through the proposed Combined Authority – to act as salesman for Service Birmingham.

The committee was also told the council is to invest a further £50 million in new computer systems between now an 2020 when the contract ends.

They also learnt the council’s computer system came under a major attack from hackers late last week when there were 24,000 unsuccessful attempts to breach the security. Mr Lubman said that as a major local government institution “We are a target.”